Christmas Newsletter 2023

In this issue:
  • ESG Update
  • Project Case Study: Baritone Court
  • Tender Price Update
  • Project Case Study: Beam Park
  • MA Expand Retrofit Expertise

Merry Christmas From Martin Arnold

Martin Arnold would like to wish all of our clients and colleagues a very Merry Christmas and a Happy New Year. Our offices will be closing for the Christmas Break on Friday the 22nd of December 2023 and reopening on the 2nd of January 2024.

ESG Update 2023

Martin Arnold are committed to supporting the communities we work in and attracting new talent into the built environment. We are delighted to have been able to support several charitable causes, either by donating our time or through financial contributions. This includes raising more than £3,000 for the RBLI and volunteering our time to the Felix Project.

In the last year, we are proud to have:

  • Dedicated 147 volunteer hours
  • Planted over 250 new native trees from the Woodland Trust
  • Offered 12 work experience placements, totalling over 100 days
  • Donated 2.14% of our pre-tax profit to charitable causes
  • Employed four Level 6 Apprentices

With the addition of four new apprentices we now have 9 apprentices in total, which will mean that apprenticeships will make up almost 10% of our technical staff, something we are very proud of. Our apprenticeship programme provides young people with the opportunity to gain valuable practical experience, whilst studying. Additionally, our apprentices do not incur the financial burden of having university fees.

In 2024, we will continue to develop our ESG priorities and work with the communities we serve to deliver genuine benefits to residents, clients and our staff.

Case Study: Baritone Court

Martin Arnold were appointed as Employer’s Agent, Clerk of Works, Principal Designer and Cost Consultant across all RIBA stages on our Baritone Court project, a scheme to remove all combustible materials from an 8-storey residential block. The building is situated in Newham and comprises 32 mixed-tenure apartments.

Our team stripped the building back to the original concrete and steel frame. The façade was then rebuilt with non-combustible materials, including mineral wool infill insulation, Y-wall sheathing board and Rockwool DuoSlab, with a new render finish.

As part of our role, we also undertook fire compartmentation surveys. Additionally, we assisted in the production of the Employer’s Requirements, prepared the JCT contract and finalised the project finances, allowing us to administer and deliver the scheme to our client’s satisfaction.

Construction quality was monitored meticulously by our expert Clerk of Works who coordinated inspections right up to handover. Martin Arnold closely monitored the works and issued instructions, chaired monthly progress meetings and agreed on monthly valuations with the contractor, ensuring a seamless process throughout. We played an integral part in delivering this project on time and within budget.

Tender Price Update

Inflation continues to be the most discussed topic in the industry, as it has been all year. Despite the threat of stagflation, great uncertainty and unprecedented hardships, the industry has remained resilient to the declining demand and has given reassurance of its robustness in the face of challenging market conditions.

The lack of strategy from the government to encourage investment and growth in construction saw the industry navigate its own way through the difficult environment. Despite the lack of direction and support from the government, the industry hasn’t gone into recession, and although the overall annual construction output for 2023, as reported by the ONS, is 1% in decline, quarter 3 of 2023 saw an increase of 0.1% in construction output.

Construction output figures highlight the impact on the private housing sector. Increasing interests rate and a decline in the starting of new projects (reduced by 14% in 2023) have presented some challenging times for housebuilders and the residential sector in general. BCIS forecasts for 2024 predict a continuation in the same direction with sustained pressure on housebuilders and a predicted construction output decrease by 12.1% in 2024, compared to the 8.3% construction output decrease observed this year. The current anticipation, as per BCIS reports and other industry indicators, is for the construction industry to return to growth in 2025, which defers the government’s commitment of delivering 300,000 homes a year even further.

Obviously, inflation remains a key feature of the wider economy with the general CPI inflation rate falling to an annual 6.1% as opposed to the reported 12.8% for the previous year. Although CPI inflation seems to be easing, the Bank of England’s warning is that the high levels will remain for longer than previously anticipated, which will negatively impact housing affordability and consequently adversely impact housebuilders.

Materials cost inflation has been easing over 2023, compared to the previous two years, coinciding with the reduced demand for construction materials in the second part of 2023. As mentioned in previous quarters, the labour costs have been highlighted as the next biggest cost driver in construction, due to the ageing workforce, alongside shortages of both skilled and unskilled labour. This has been counteracted by the decline in demand which has also led to impeded wage growth. A new report by Turner and Townsend has indicated that the cancellation of the second leg of HS2 could potentially release expertise and labour to be utilised in other sectors and projects.

While year-on-year inflation is currently at 3.5%, the quarterly BCIS TPI is at 0.5%, a further reduction of 0.3% from the previous quarter with the next forecasted quarter at an even further decrease to 0.3% movement on quarter, showing a consistent slowdown in prices over the last 3 quarters. Annual TPI increased by 3.5% between 4Q2022 and 4Q2023.

The BCIS panel reported an average of 5.3% for OH&P from the overall contract sum for 4Q2023, a slight increase to the 5.2% in 3Q2023. There has been a shift in the contractors’ appetite for risk, with contractors seemingly keener to tender for projects. BCIS Panellists have also observed the contractors’ selectiveness over procurement routes as well as considerations of projects’ risk profiles, with projects of a complex nature and long programmes finding it harder to attract interest. This aligns with the general approach seen by Martin Arnold across our sectors.

An increased trend of insolvencies in the construction industry has been observed in recent months, highlighting capacity issues in the market. The total number of construction firms becoming insolvent in 2023 is 4,287, an 8.3% increase on the previous year, with M&E companies being particularly vulnerable and at greater risk due to the lack of diversification opportunities.

With new housing output on the downturn, we have observed a leap of retrofit and repair and maintenance work keeping the industry afloat, underlined by the recent issues surrounding Reinforced Autoclaved Aerated Concrete (RAAC) which has highlighted the issue of insufficient funding and strategies to maintain public buildings. The government’s decision to reverse requirements for all rental properties to meet a minimum of EPC rating C by 2028 is expected to further impact retrofit, repair and maintenance construction output. However, the GLA has drafted climate mitigation policies within its London Plan, encouraging ‘retrofit first’ policies which may counteract this in London.

Case Study: Beam Park

An iconic development on the boundary between the London Borough of Barking and Dagenham and the London Borough of Havering, Beam Park is expected to comprise circa 2,000 dwellings, a central energy centre, local amenities and public parks. The scheme is being delivered by a joint venture between Countryside and L&Q.

The development has been split into several smaller phases of works with Phase 1 containing 640 dwellings, of which 346 are affordable and a mixture of houses and flats. Martin Arnold are appointed as the Employer’s Agent on behalf of L&Q for the affordable housing allocation of Phase 1.

To date, Martin Arnold have successfully managed the Practical Completion of all 346 dwellings and are currently managing the projects through the Defects Period. The final dwellings will achieve their End of Defects period by early 2025.

MA Expand Retrofit Experience

In a continued effort to develop the services we can offer our clients, MA has been supporting several members of the practice through training and skills development to enhance their retrofit knowledge. We are thrilled to announce that Associate Dan Assender has passed his exam to become a Certified Retrofit Coordinator (PAS 2035) and Associate Chris Los has passed his exam to become a Certified Passive House Designer.

As Certified Retrofit Coordinators we can provide assessments of a building’s condition, including any structural defects. This information will then be compiled into reports to help our clients ascertain the measures that need to be taken to improve the building’s energy efficiency. As Certified Passive House Designers, we have extensive knowledge of the Passive House principles, which can be utilised to deliver more sustainable buildings.

We are currently involved in a number of projects involving sustainable design, including for the Royal Borough of Greenwich to retrofit 665 properties within our home borough. The £21 million project is being delivered in line with the Council’s ambitious carbon neutral plan and target to reach net zero carbon emissions by 2030.

This will only be achieved with large-scale retrofitting of the social housing stock, ensuring that decarbonisation occurs alongside energy efficiency improvements and the elimination of fuel poverty. The emphasis is on a fabric-first strategy to deliver much needed energy efficiency improvements to homes where it is most needed.

Check out some of our retrofitting projects here.